Mainland Internet portal Sohu has narrowed its third-quarter pro forma net loss by 23 per cent to US$2.7 million against last year's US$3.5 million. In the three months to September 30, revenue increased 122 per cent to US$3.6 million, with almost a third from non-advertising avenues including short messaging service (SMS) for mobile phone users. Gross margins rose from 21 per cent in the second quarter to 33 per cent. However, with the US$22.27 million total write-off including chinaren.com, a chat site acquired in November last year, the balance sheet of the Nasdaq-listed company shows an actual net loss of US$24.98 million. Chief executive Charles Zhang said the total write-off would save the company from writing off US$4 million every month for the chat site. Mr Zhang said he was optimistic about Internet development in China. 'We are satisfied with the result. We'll keep the promise that we'll be able to break even by the end of next year,' he said. 'The Internet business in China is different from the rest of the world. As the flow of information in China is limited, the Internet becomes a major channel for information. Even if global Internet development is slowing, China's won't.' David Cui, a media analyst at Merrill Lynch, said Sohu's management deserved credit for the improved financial status but he held back on whether the company would break even next year as promised. 'I think the management did well in the previous quarter. Their track record is good and they keep most of what they promised. The growth margins have increased and the total revenue is quite encouraging,' he said. 'But there's something which is beyond their control. There are a lot of changes in online advertising. The odds and difficulties should also be taken into consideration. There's still uncertainty here.' Revenue from advertising rose 9 per cent to US$2.4 million. Mr Zhang said traditional companies had begun putting advertisements online as it had become an effective way to reach potential consumers. 'More than half of the urban young are Internet users. These companies want to reach them,' he said. Non-advertising revenue rose 75 per cent to US$1.1 million. This included revenue from SMS, e-commerce and technology. Mr Cui said Sohu was right to find different ways to generate revenue. However, he was concerned whether these revenues would last. 'I have a long-term concern on how sustainable the SMS can be, and how sustainable those margins can be,' he said. The largest shareholder in Sohu with a 25 per cent stake, Mr Zhang said he was not worried that the stock price would be affected if another big shareholder, Beijing Beida Jade Bird, sold its 19 per cent stake. 'Sohu's business is improving. I believe a lot of people are interested in buying it. Perhaps there will be a short-term effect [if Jade Bird sells its stake], but the mid-term stock price won't be much affected,' he said. Jade Bird deputy chairman Fan Yimin said two weeks ago that the company had decided to sell its stock as he found it difficult to co-operate with Sohu's management. However, Mr Zhang said Jade Bird was a passive shareholder and not involved in management decisions.